Kiwi retailers returns processes frustrating customers and losing money

With 30 per cent of all products purchased online likely to be ‘comebacks’, the returns process continues to be an underestimated cost to retailers–many do not know the number of returns or resulting losses–and a source of frustration for Kiwi shoppers.

According to NZ Post, New Zealanders spent more than $550m online on physical goods during the significant November sales events such as Click Frenzy, Singles’ Day, Black Friday and Cyber Monday. That equated to about 161,000 transactions per day. 

While that’s a lot of activity occurring in the e-commerce space, a 2021 study from the University of Alabama showed that about 30 per cent of goods purchased on e-commerce sites are likely to be returned, compared with 9 per cent for goods bought at brick-and-mortar stores. 

I can vouch for those high returns rates for online companies. Although many e-commerce stores did well over Christmas, the percentage of returned goods is likely much the same for that period. 

Many online retailers get very excited about making sales, but they underestimate how many returns they expect and tend to get flustered when they start coming in. 

Compounding this problem is that not many e-commerce companies keep good data and statistics on products sold, which means they end up fumbling around trying to link sold items to returned items. Of course, you can imagine how it would frustrate the customer.

Being better prepared for a high cadence of returns should be priority number one for e-commerce companies. With so many different options for the consumer, it doesn’t take much friction in the buying or returns process to turn a possible repeat customer away forever. 

But it also only takes a little to boost profitability by solving some low-hanging problems in the returns process. 

A study from the ECR Retail Loss Group in Europe found that, for the average e-commerce business, improving the rate of returns by only 5 per cent can add more than 2 per cent to the net profit of that company. For some companies, that will be the difference between carrying on and closing. 

Returns can be a significant opportunity to cement the customer relationship at a time when the customer could easily be disappointed and never revisit the store. Likewise solving a pain that the customer may be experiencing at that time could make them a loyal customer for life.

Online retailers find it difficult to pin down crucial information such as the rate of return and the costs of handling a returned item. Many of our clients don’t know what percentage of their sales results in returns. 

None of that engenders much trust between the customer and company. And in business, trust is the real currency. Returns may be inevitable with e-commerce, but customers shouldn’t be pulling their hair out trying to do it.

Here are some tips for e-commerce companies looking to improve their returns process. 

1. Treat returns as a profit centre 

It can be easy to see returns as a failure, but I suggest flipping that frame on its head and treating all returns as a possible new product.

Instead of sending a returned item to the landfill (if it has been damaged), e-commerce companies should build connections with outlet stores.

By having a secondary market available that will buy a product at a lower – but still profitable – price, e-commerce companies can better protect their bottom line and incentivise their staff to treat returns with the proper care.

2. Create a simple system 

Assuming every third product will be returned, e-commerce businesses can begin on the right footing by gathering basic customer data (like rewards programmes) and incorporating this preparation into staff training. 

Make sure all the right information is collected at the first point of contact regarding the return. Give them the correct form to fill out when requesting a return, send that information to the right person who will check the form, confirm the process at each step with the customer and here, offer them a helpdesk number to call if they get stuck. That will do wonders for trust.

3. No surprise costs 

An innocent product return might be painful if the customer is forced to pay for their deliveries. Too many e-commerce companies try to squeeze extra margin by charging customers for courier bags when returning items. 

I shouldn’t have to say this but don’t surprise customers with extra costs, especially during the returns process. Cover that cost in the initial item price and offer free shipping. 

After all, what’s the first thing an angry customer will do in the age of social media? They complain online, which lowers your company’s trust level in the market. 

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